By Alamira Jouman Hajjar, Research & Editorial Manager, IOV Labs
This article is a part of IOV Labs’ series focused on helping newcomers to the world of Web3 understand the value of decentralized finance. Read on to understand the top 3 factors to consider when choosing a crypto wallet for personal and business needs.
You could say that decentralized finance is the jewel in crypto’s crown, with the segment projected to reach over $760m this year and grow by almost 27% between now and 2027. Thanks to the increased adoption of cryptocurrency in everyone from serious traders to curious side hustlers, it’s fast become a cornerstone cryptocurrency tool.
Perhaps the most powerful (and practical) application for decentralized finance is in DeFi wallets; the programs that allow users to collect and manage their disparate crypto coins and tokens from a single, decentralized platform. These digital wallets are key when it comes to managing crypto assets so if you’re new to the world of crypto then you’re definitely in the right place.
Below, we’ll be discussing what DeFi wallets are, compare the top 3 most popular wallets, and examine the UX issues that most wallets face today. Let’s start with the basics, shall we?
What is a DeFi Wallet?
Think of a DeFi wallet as a virtual (or sometimes hardware) wallet in which you can store all your digital currencies and other decentralized assets. A DeFi wallet can be accessed either through a web browser or mobile app and is secure by nature, as it’s built on blockchain technology.
Types of DeFi Wallets
There are currently three basic types of DeFi wallets that all work in roundabout the same way but differ in how they are accessed.
Web-based wallets, for example, are the most immediate and beginner-friendly, as they can be accessed through any web browser.
Mobile wallets, meanwhile, are based on bespoke smartphone apps and boast a more immediate asset management method for those who want to check their portfolios on-the-go. With transaction speed one of the main driving forces behind the popularity of cryptocurrencies, mobile wallet apps have quickly become the beating heart of the market.
For businesses that are dealing with large and complicated asset portfolios and are seriously concerned with security, however, hardware wallets that store access keys on a physical device (much like a dongle) might be a worthy consideration.
Almost $2 billion of cryptocurrency was stolen in 2022 alone but by using a hardware device that isn’t connected to the internet, businesses can avoid even the outside chance of compromise. They are effectively unhackable but are also quite inconvenient for those just getting started in the world of crypto.
How do DeFi Wallets Work?
DeFi wallets are built on completely decentralized blockchain technology. This works by scattering information amongst potentially thousands of nodes and giving only one person access to the information that allows them to piece it all together on the other end.
Because it’s so difficult to compromise so many nodes at once, hacking on the blockchain is exceptionally rare and that’s why it doesn’t need intermediaries (such as banks) to get involved in the verification process.
Crypto payments are made directly from business to business or person to person and use smart contracts to automate actions that would otherwise be taken care of manually by the parties involved in the trade. This effectively removes the need for those parties to trust each other.
While you might assume DeFi wallets would have to work exceptionally hard to keep track of all this information, all they really need to do is hold and manage the various private access keys that allow access to only the individuals or businesses the assets are meant for. This all means that users have a much greater degree of control over their funds in a DeFi wallet than in a conventional digital wallet.
Benefits of Using DeFi Wallets
Because all DeFi wallets are decentralized, users can deal with anyone, anywhere in the world without worrying about third party interference or approval of transactions. This is key for those living in emerging markets with stricter financial regulations to overcome.
DeFi wallets are built on inherently secure blockchain technology and give users complete control over their assets. Anyone particularly worried about security, meanwhile, can always use a hardware wallet.
All that’s needed to use a DeFi wallet is a stable internet connection and a compatible device, which can be anything from a laptop or desktop computer to a smartphone or tablet. Transactions can be made by anyone and from anywhere in the world without having to go through any lengthy and potentially costly KYC processes. This makes it infinitely more accessible to those who live in developing countries that might have limited access to traditional financial services.
Factors to Consider When Choosing a DeFi Wallet
- Supported Cryptocurrencies
Some wallets might only support a limited number of only the most popular cryptocurrencies like Bitcoin, Ethereum and Tether, while others may support a broader range of the more under the radar coins. With an estimated ±22,9 cryptocurrencies currently on the market, ensuring the wallet you choose supports as many currencies as possible could be important, particularly if you intend on trading.
- User Experience
One thing cryptocurrency has never been accused of being is accessible. That perception is changing though, and that’s largely thanks to the use of more immediate and user-friendly interfaces. A good DeFi wallet should provide a clear, simple interface, similar to traditional fintech apps, with features that don’t intimidate the user but instead offer them room and incentives to expand their horizons.
- Community and Development Activity
As with any digital tool, the ones with the largest and most enthusiastic communities are always going to be the ones that thrive and offer the greatest level of continued support. Look for wallets with deep and far-reaching communities and you’ll find those that will endure.
How to Choose the Right DeFi Wallet
You need to ensure you’re choosing a DeFi wallet solution that works for your personal matters and for your business by getting to know its unique quirks, features, and the development team working behind the scenes. Research everything from the team’s previous projects to the eccentricities of the mobile app and don’t be afraid to try before you buy with a free trial.
- User Reviews
User reviews offer unbiased perspectives by offering a genuine experience from people who have actually used the wallets. They can provide deeper and more accurate insights into the wallet’s usability, security, and overall quality.
Comparison of Popular DeFi Wallets
There are dozens of options to consider when it comes to DeFi wallets, each offering unique benefits and weaknesses.
Perhaps the most visible option on the market right now is Metamask. It’s easy to see why this one has captured the attention of so many as it boasts a clean, ergonomic interface and is open source, which means it can be easily accessed through almost any browser. It is seen as being slightly less secure than other solutions though.
Trust Wallet is another common favorite that boasts plenty of advanced features like multi-factor authentication. It was also developed by Binance, which is arguably the biggest player in the cryptocurrency exchange game right now so there’s definite name recognition in place here. If you don’t use Binance, however, it’s probably not going to be of much use to you.
This wallet supports over 500 coins and tokens and offers private key management as standard. For a free service, it’s very fully featured with a nice tidy interface and lots to offer, but it is far from a flexible solution. For that balance of flexibility and useability, you’re going to want to consider RIF Wallet.
What is a RIF Wallet?
One challenge that most of the currently existing wallets have is the difficult user experience. This can presented in multiple issues, such as:
- Needing to create 14-word keypasses instead of simple passwords.
- The lack of clear instructions on the user journey, such as not knowing which network you need to connect to in order to perform certain transactions.
- Unclear requirements on gas fees, such as the need to have X token simply for paying gas fees whether or not you intend to use token X for any other purpose.
RIF Wallet is the ideal, all-in-one DeFi wallet with unlimited UX functionality thanks to the bones of its open-source technology. It also works on the same secure smart contract network as Bitcoin, meaning you have the full power and resilience of the biggest cryptocurrency in the world on your side.
A comprehensive solution for users that demand speed, security and reliability, RIF Wallet not only allows businesses and developers to build their own smart wallets but to integrate crypto management services into their existing offerings with smart contract features and functionalities, all packaged up in an intuitive UX design.
To learn more, check out the RIF Product Suite today and discover our ever-growing toolkit of protocols engineered to help you build fast and scalable products on the blockchain and create the next generation of financial products.